Tom Tunguz wrote an insightful piece analyzing the recent Slack S1 filings and comparing it with its cohort including Zoom in particular which also had a stellar debut couple of weeks back.7 key metrics put Slack in a comfortable position poised for spectacular growth. The only data missing, though tangential but relevant is how much each company raised unto the point of IPO. In case of Slack it was $1.2Bn while Zoom raised $145Mn (source CrunchBase, link below).
While both companies grew substantially and both saw a slowdown in YOY growth, Zoom grew faster overall (110% of Slack as compared with 149% of Zoom for 2018 and 82% of Slack as compared with 118% of Zoom for 2019). Slack’s revenue at IPO was $401Mn as compared to Zoom’s – $331Mn, Atlassian $319Mn and NewRelic $85Mn. Annual Contract value (ACV) for Slack was the smallest at around $4552 with around 17 users / company vis a vis $5074 for Zoom, $6646 for Atlassian and $8027 for New Relic.
The number of paying customers have grown substantially for both, but for Slack because its ACV is lower and total revenue is higher the base is significantly more – 88K vs Zoom’s 51K. Net dollar Retention minus churn is also at a healthy 143% and 140% respectively.
In terms of Gross Margin Slack is ahead of Zoom with 85% (Zoom 79%) in 2017 to 87% (Zoom 82%) in 2019. This, according to Tom is due to higher infra costs of Zoom to host and manage videos while Slack hosts mostly images and text.
In terms of Sales Efficiency – $1 spent on marketing generates $1.11 in gross profit the next year for Slack while for Zoom it delivers $1.80. This again according to Tom could be due to the inherent virality built into Zoom. The R&D expense is also interesting as that is a key factor of Zoom being profitable by 2% at the point of IPO. Zoom spends only 10% of revenue for R&D as against 39% of Slack. This is definitely due to the fact Zoom has its majority engineering team in China.
All on all two iconic success stories, now clearer with their S-1 flings. Great learning for SAAS founders looking at these 7 key matrices now you have some benchmarking data to plot your numbers against.
Links to the Tom Tunguz’s analysis for both Slack and Zoom :
Crunchbase news on Zoom IPO – https://news.crunchbase.com/news/first-notes-as-zoom-files-to-go-public-with-quick-growth-actual-profit/
Crunchbase on Slack IPO ( Direct listing ) https://news.crunchbase.com/news/slack-apparently-wasnt-kidding-about-a-direct-listing-reportedly-hearts-the-nyse/